The Bank of England is to appoint a fourth deputy governor to oversee banking and markets in the wake of damaging claims that some of its officials knew about alleged foreign exchange rate-rigging.

Bank chief Mark Carney told MPs the new official would be asked to conduct a "root and branch review" of how it monitors markets.

He added that the Bank would discuss with the Financial Conduct Authority (FCA) and the Treasury "changes that might be warranted" to the foreign exchange market "to ensure that it is a true, fair and open market as people have the right to expect".

The governor set out the measures as he was grilled by members of the Treasury Select Committee just days after the Bank suspended an employee over compliance concerns following an internal probe.

He admitted that it was an "unhappy situation to be in", but insisted that the Bank was relentlessly pursuing an investigation into the allegations and that it must be regarded as "beyond reproach".

"We owe it to the people of this country, we owe it to Parliament. We also owe it to our employees who have acted with integrity and dedication. We can't come out of this with a shadow of a doubt about the integrity of the Bank of England."

He said of the alleged forex fixing: "This is as serious as Libor, if not more so, because it goes to the heart of the integrity of markets."

Mr Carney added that both scandals were "symptomatic of a group of individuals in markets... who have lost sight of what a real market is, and that is unacceptable".

Disclosing the appointment of a new deputy governor, he said: "One of the first tasks of that individual is that he or she will conduct a root and branch review of how we conduct market intelligence, how we use it."

Mr Carney also revealed that major central banks were working together to try to reform markets in the wake of the alleged misconduct and would be reporting back to the leaders of the G20 economies.

Regulators around the world including the UK's FCA are investigating the alleged rigging of the £3 trillion-a-day forex market amid fears it could match the scale of the Libor rate-rigging affair which has already cost banks billions in penalties.

The Bank was publicly drawn into the affair after it was reported that its officials were made aware of information-sharing between traders from rival banks - an alleged practice at the heart of the probe.

It was claimed that the officials told the traders there was no policy on such communications and that banks should make their own rules.

The Bank of England firmly insists that it does not condone such market manipulation and Mr Carney said it had found no evidence that its staff had condoned, participated in or facilitated it.

But he said that the suspension of a staff member related to processes including its records management and "escalation" - or referring issues up to senior management.

Mr Carney said Bank workers were held to a "very high standard" of conduct.

"Our employees meet that 99.99% of the time but we expect that our standards, particularly with respect to rigorous control procedures, are there for a reason."

He said the Bank had strengthened these procedures and had asked staff to look back at whether these might have set off concerns about any such rigging in the past.

Mr Carney said the Bank had first become alerted to the affair by a private sector market participant on October 16 and within 48 hours had instructed law firm Travers Smith to launch a secret probe. Details emerged publicly earlier this year.

He added: "The institution has to be beyond reproach, we have to have the highest standards of integrity. How do we ensure that? We ruthlessly, relentlessly follow through with the investigation of what happened."

Pressed on whether the Bank had been aware earlier, Paul Fisher, executive director for markets, told the hearing he had not known of specific allegations before last year.